Obsidian Energy's (OBE.TO) price target has been reduced to C$10 from $12 while its stock rating was downgraded to Sector Perform from Outperform, RBC Capital Markets said in a Thursday note.
Under its base outlook, RBC said Obsidian was trading at an estimated 2025 debt-adjusted cash flow multiple of 3.2x, compared to its oil-weighted Canadian exploration and production peer group average of 3.9x), and at a negative free cash flow yield, compared to 9% by peers. "We believe that Obsidian should trade at an average/modest discount relative valuation given the upside potential with the company's
Peace River portfolio, partly offset by its limited scale and lack of visibility towards its growth plans."
RBC noted Obsidian remains in the process of assessing its full- year 2025 development plans and longer-term strategic direction following its transaction with InPlay Oil, citing the "choppy" macroeconomic environment. "At this time, the minimal near-term visibility toward any meaningful catalysts gives us pause, and it would not surprise us to see the company potentially take a step back on its activity levels this year," RBC said.
Obsidian traded 5.6% lower at last look to $6.56 per share on the TSX.
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